Cognizant senses possible slowdown in BFSI revenue growth, TCS senses the opposite

There is a divergence in the way India's top two IT exporters view their prospects in 2016, particularly in the banking, financial services and insurance (BFSI) vertical. The sector, traditionally a cash cow for the industry, generates over 40 per cent of the revenues for many companies. But Cognizant, on February 8, said it would grow full year 2016 revenues 10-14 per cent - that's a wide range and tepid compared to its 2015 revenue growth of 21 per cent to $12.42 billion. There are many headwinds for Indian IT companies this year - oil prices, currency volatility, protectionism. But Cognizant pointed to spending issues in financial services as well as healthcare.

India's largest IT company TCS, on the other hand, appears confident the BFSI vertical would do well. CEO N. Chandrasekaran told reporters on the sidelines of the Nasscom India Leadership Forum that BFSI will be a "very good sector" for TCS. "Insurance was weaker last year. But we are seeing good traction now," he added. Opportunities in the sector range from digital transformation to compliance work.

So, what explains this divergence?

Cognizant has grown at a scorching pace for many years - and some industry watchers think moderation is due, particularly because of the base effect. At $12 billion, it is second only to TCS in the industry's pecking order.  Possibly, the company is facing client-specific issues. But is there something Cognizant has noticed that TCS hasn't?

TCS declared its December quarter results on January 12 - nearly a month before Cognizant did. And in the past few weeks, Cognizant said it has noticed a series of small discretionary projects in BFSI being delayed. That's a lead indicator not all is well with the macro economy - this is exactly how the slump of 2009 began.  Things can change fast.

We will have to wait another quarter to figure out if Indian IT can battle the odds and champion its twin value propositions: help customers increase efficiency and 'transform' digitally. We would also know which of the two tech services giants read the market better.